Europe crisis hits new peak on ‘depression’ alert

Europe reeled on Monday from warnings it faces “deep depression” if the eurozone collapses and that every EU nation’s credit rating could be hit without firm action to stop the debt crisis.

An updated growth report from the OECD said the eurozone debt crisis was now just one step away from plunging advanced economies into an abysss of recession and could trigger waves of bankruptcies and wealth destruction.

And one of the world’s three main ratings agencies, Moody’s, warned even countries such as Germany may have to have their credit status revised — a move which would force them to pay higher borrowing costs.

Italy, the focus of warnings from Germany and France that if it cannot dominate its debt problem it will wreck the eurozone, struggled to raise funds on the bond market.

Despite the glut of bad news, stocks rose after reports that the International Monetary Fund was readying a bailout for Italy. The markets in Milan, Frankfurt and Paris all registered upswings of more than three percent.

The IMF denied that talks on any such deal were taking place.

The report by the Organisation for Economic Cooperation and Development made grim reading as it forecast the United States faced a period of slow growth, Japan’s economy would shrink 0.3 percent this year and developing nations would also see a slowdown.

But its starkest warning was reserved for the 17-nation eurozone which it said was set for growth of 1.6 percent and next year just 0.2 percent.

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